Macro Bites

Macro Bite # 25

5 min read

Readers might have noticed that at the end of these weekly bites, we have started sharing suggested articles from local and international news. We track important announcements related to the Pakistani and Global economy through the week and include what we think would be interesting for Macro Pakistani readers to learn. Last week, we included Profit’s article on how consumer confidence continues to improve in Pakistan. This was based on a quarterly survey by Gallup Pakistan and Dun & Bradstreet back in September with results published on 25th November.

However, the State Bank of Pakistan, in collaboration with IBA, also reports a Consumer Confidence Survey every two months, for which the most recent data was collected in November. The results of that survey, published this week, show how consumer confidence has actually fallen by 7.5% since September 2020, on the back of a rise in COVID-19 cases in Pakistan. While consumer expectations are still above their levels in July 2020, people have become more uncertain about making purchases like durables, cars and houses between September and November.


While November saw consumer confidence going down since September, the news of vaccine approvals is helping stocks inch higher in hopes of an economic recovery. Systems Limited, a listed technology company in Pakistan and the country’s largest IT exporter, won the Forbes Asia’s Best Under a Billion Award. The consequent stock price gains helped it become a top contributor to the market. The dollar fell to its lowest level in 2.5 years, helping the exchange rate stay around PKR 160 while gold prices inched higher. While we report weekly Sensitive Price Index, the authorities report Consumer Price Index each month. The story for both is the same: with food inflation coming under control, inflationary pressures have started to fall.

Though prices fell by 0.23% compared to last week across all income quintiles, the annual increase in Sensitive Price Index was 8.14% compared to 7.48% the week before. Inflationary pressures on the poorest of the country (lowest 20% of income earners) continue to be the highest on an annual basis, despite experiencing the sharpest weekly drop in prices. This was mainly because while food prices are coming under control, they are still significantly above last year’s prices. Price increases in Chicken (67.18%), Potatoes (61.47%), Sugar (22.12%), Ghee (17.53%) and Daal Masoor (16.12%) remained higher between 2019 and 2020, than the year before. However, a continued push to keep weekly commodity price increases in check should result in lower annual inflation soon. You can browse these cyclical changes in prices on our dedicated page for more price details!

What steps has Pakistan taken for climate action?

By Muhammad Ahmad
Returning to the conversation that Muhammad started three weeks ago, we know Pakistan should care about climate change. This week, he highlights the actions Pakistan has taken since signing and ratifying the Paris Agreement on climate change. While Pakistan’s energy mix is quite favorable vs its much larger neighbors, India and China, the use of ‘dirty’ energy sources is on the rise. The contribution of coal has doubled from 5% of total energy supply to 10%, between 1990 and 2018, which might dampen the impact of other positive initiatives such as the Quaid-e-Azam Solar Park, Electric Vehicle Policy and Ecosystem Restoration Fund.
Read more


Total Energy Supply in Pakistan by Source (%)
Contribution of ‘dirty’ energy sources, specifically coal, has risen in Pakistan
Source: International Energy Agency

One area where Pakistan has shown clear success is in Afforestation measures – AKA Tree Plantation ‘Tsunamis’. In 2017, the KPK province achieved its billion-tree target ahead of schedule, adding 350,000 hectares of trees. This is a significant addition, given forests covered between 4 and 5 million hectares in 2012. This was important, because its success is what prompted the 2018 federal plan to plant an additional 10 billion trees nationally- roughly an additional 6 million hectares – doubling the current coverage. Forests are the most effective naturals mechanisms for carbon ‘sequestration’ – they act as carbon ‘sinks’ – effectively removing carbon from the atmosphere, thus reducing the concentration of Greenhouse Gases (GHG). Additionally, Pakistan has also reversed the trend of deforestation, which caused 9.61 kha of tree cover to be lost in the last two decades.

Tree Cover Loss in Pakistan (kha)
Pakistan has successfully reversed the trend of deforestation in recent years.
Source: Global Forest Watch

Read the full article if you want to understand what the Paris Climate Agreement holds, how Forest Carbon Cycles work and why everything Pakistan has done to date is still not enough.

What Else We’re Reading (Local)
Pattern of weak economic management has been repeated since the 1990s with issues of competence, political expediency and short term thinking responsible (Dawn)
FBR tax collection went up by 3.8% to PKR 1,688 billion in the first five months of the fiscal year (Jul-Nov) and exceeded the set target of PKR 1,669 billion (The News)
‘Peak hour’ electricity rates for industrial consumers abolished in line with the Industrial Support Package to allow round the clock operations and greater output (Business Recorder)
Lack of understanding about the functioning of the free markets has meant a much greater presence of the state than is required to promote public interest (Arab News)

What Else We’re Reading (International)
COVID-19 has caused globalization to mutate, but not killed it off. Globalization of information fuels global ecommerce, making cross-border supply chains more flexible. (Financial Times)
Travel demand is expected to snap back very strongly after a grim winter, as Boeing lands its biggest orders for the recently reinstated 737 Max (Bloomberg)

Faiz Ahmed

MBA Candidate at Harvard Business School with prior experience at Bain & Company, International Finance Corporation and State Bank of Pakistan. He is also the Founder of Macro Pakistani.

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